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You're Not Exhausted: U.S. Patent Rights Are Not Exhausted By Foreign Sales

By Matthew W. Siegal and Angie M. Hankins

Your client International Marketers, Inc. (IMI) owns U.S. and foreign patents for an improved football. IMI wants to license the patent and make direct sales of identical balls around the world, while making its own sales to the U.S. market. However, IMI knows that the price consumers will pay for its football is much higher in the United States than elsewhere. IMI is concerned that footballs sold by it and its licensees to distributors outside the United States might be purchased by third parties and imported back into the United States at a price below what it hopes to charge distributors in the United States.

IMI wants to know whether it can assert a claim of patent infringement against the third parties despite the fact that the balls were first sold outside the United States either by IMI or under IMI's authority. It is now clear that the answer can be “yes.” Rights under a U.S. patent are not automatically exhausted by the patentee's or its licensee's sales of the patented product to third parties in foreign countries. In other words, a U.S. patent holder's rights are not exhausted unless the authorized sale of the patented item occurs within the United States. This result might be surprising to some because it can be contrary to the first sale doctrine under U.S. trademark laws.

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